Opinion with Peter Hug
Fed Minutes Seemed Dovish But...
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
(Kitco News) - The markets reacted to the FOMC minutes from January that were released yesterday. At first, the markets saw the minutes as dovish and both the metals and equity markets shot higher. Then the market realized that the minutes were from before the higher inflation data that was released in February and the Trump tax cut. The market assessed that had this data been considered, the Fed would have been much more hawkish and the markets reversed with momentum. We continue to remain skeptical that the Fed will be as aggressive as the market assumes, with the risks associated with higher rates. The wealth effect of the Fed’s accommodation, which is evident in both the equity and housing markets, will be seriously undermined. You can argue that both markets are in a bubble, but we believe the Fed will tread very conservatively in hiking rates and may allow inflation to prove hotter before pulling triggers. Gold moved to our major support line of $1,322 and must hold this level from a technical perspective. A break here suggests $1,307. Worth a long trade here, with a tight stop at $1,317.